Understanding Purchase Requisitions: A Comprehensive Guide

Delivering value through procurement can be challenging without the use of purchase requisition process. Depending solely on purchase orders can hold your team back as you scale. Having purchase requisition process helps you to gain visibility and enable employees to be part of the purchase activities.

Several businesses are unwilling to update their procurement process, even though it directly affects their bottom line. These organizations fail to understand that the more employees start involving in procurement activities, the less control and visibility they have on their spend.

To ensure spend visibility and eliminate maverick spending, businesses must streamline their requisition processes.

Here is everything you need to understand to streamline your requisition process.

What is a Purchase Requisition?

A purchase requisition is an internal document created by an employee to request the purchase of goods or services. It initiates the purchasing process and ensures that all necessary approvals are obtained before any purchase is made. This document typically includes details such as the items needed, quantity, estimated cost, and the reason for the purchase.

What is the Difference Between a Purchase Requisition and Purchase Order?

Why Do You Need Purchase Requisitions?

Organizations can build an accountable spend culture and maximize spend effectiveness through purchase requisition processes. It also greatly eliminate unapproved spending while enabling employees to be part of the purchasing process.

Control and Oversight

Purchase requisitions provide a systematic way to oversee and control spending within an organization. With purchase approval process, organizations can ensure that all expenditures are necessary and authorized. This control mechanism helps prevent unauthorized purchases and reduces the risk of fraud.

Budget Management

With a purchase requisition process in place, managing your budget gets lot easier. It ensure that all purchases are approved, tracked, and complaint with your procurement policies and budget constrains. Requisition approval process gives spend visibility and eliminate maverick spending.

Documentation and Accountability

Having a documented trail of all purchase requests is essential for accountability and transparency. Purchase requisitions create a paper trail that can be used for auditing purposes, ensuring that every purchase is justified and approved. This documentation helps in resolving disputes, tracking spending patterns, and maintaining compliance with internal and external regulations.

Streamlined Procurement Process

Purchase requisitions help streamline the procurement process by clearly outlining the need for goods or services before initiating a purchase. This helps in planning and organizing procurement activities, reducing delays, and improving the efficiency of the purchasing process. It ensures that all necessary information is available upfront, which speeds up the approval and procurement cycle.

Enhanced Compliance

Purchase requisitions help ensure compliance with internal policies and external regulations. By mandating approvals and providing a clear record of purchase requests, organizations can demonstrate that they follow proper procedures and adhere to regulatory requirements.

Purchase Requisition Process Flow

The purchase requisition process begins when an employee identifies a need for goods or services. The employee completes a purchase requisition form, which is then submitted to the relevant department or authority for approval. Once approved, the requisition is converted into a purchase order, which is then sent to the supplier to fulfill the order.

Steps in the Purchase Requisition Workflow

1. Identify Need: Employee identifies a need for goods or services.
2. Create Requisition: Employee completes and submits a purchase requisition form.
3. Approval: Requisition is reviewed and approved by the relevant authority.
4. Convert to Purchase Order: Approved requisition is converted into a purchase order.
5. Order Fulfillment: Purchase order is sent to the supplier, and the order is fulfilled.

What is a requisition form?

A purchase requisition form is a document used internally within an organization to request the purchase of goods or services. It serves as a formal request from a department or employee to the procurement or purchasing team to initiate the procurement process. The requisition template typically includes details such as the type and quantity of items needed, the preferred supplier, the estimated cost, and the reason for the purchase. Once the requisition is submitted, it must be reviewed and approved by the appropriate authority within the organization before a purchase order is issued to the supplier.

Here are the common details covered in a purchase requisition form template:

1. Requestor Information:

   • Name: The name of the person or department requesting the purchase.
   • Department: The specific department within the organization that is making the request.
   • Contact Information: Email address, phone number, or other contact details for the requestor.

2. Requisition Number:

   • A unique identifier for tracking the purchase requisition within the organization's procurement system.

3. Date of Request:

   • The date when the requisition form is submitted.

4. Description of Items or Services:

   • Item Name/Description: Detailed description of the goods or services being requested, including specifications, models, or part numbers if applicable.
   • Quantity: The number of units or amount of the items or services needed.
   • Unit of Measure: Specifies how the quantity is measured (e.g., pieces, boxes, liters, hours).
   • Price: Estimated or known price per unit.
   • Total Cost: Total estimated cost for the requested quantity.

5. Supplier Information:

   • Preferred Supplier: The name and details of the preferred supplier if one has been identified.
   • Alternative Suppliers: Information on other potential suppliers.

6. Justification/Reason for Request:

   • A brief explanation of why the goods or services are needed and how they will be used. This can include the purpose or project the purchase will support.

7. Budget Information:

   • Budget Code or Account Number: The financial account from which the purchase will be funded.
   • Budget Approval: Indication of whether the purchase is within the approved budget.

8. Approval Signatures:

   • Approval Authority: Signatures or digital approval from authorized personnel (e.g., department heads, finance managers) who need to review and authorize the purchase.
   • Date of Approval: The date when the approval is granted.

9. Delivery Information:

   • Delivery Address: The location where the goods should be delivered or the services should be performed.
   • Delivery Date: The required delivery date for the items or services.

10. Payment Terms:

    • Information about the payment terms agreed with the supplier (e.g., net 30 days, upon delivery).

11. Attachments:

    • Any relevant documents such as quotes, product specifications, or supplier proposals that support the requisition.

12. Notes/Additional Information:

    • Any other pertinent details or special instructions that need to be considered during the procurement process.

How to Tell if You Need a Purchase Requisition Process

Determining whether your organization needs a purchase requisition process involves evaluating your current procurement practices and identifying areas of improvement. Uncontrolled spending, lack of visibility, frequent errors, tracking difficulties, inefficient workflows, compliance issues, and scaling challenges are all indicators that a formal purchase requisition process could significantly benefit your organization.

• Uncontrolled spending and budget overruns.
• Lack of visibility into procurement activities.
• Frequent purchasing errors and discrepancies.
• Difficulty in tracking and documenting purchases.
• Inefficiencies in Approval Workflows
• Issues with Compliance and Accountability

Take advantage of purchase requisition process

Enforcing purchase requisition in your procurement process ensures that all purchases are made strategically and in compliance with organizational policies. It helps prevent unauthorized spending, improves financial accountability, and enhances overall procurement efficiency. By implementing and automating a robust purchase requisition process, organizations can achieve greater control over their procurement activities and drive better business outcomes.